The Euro strengthened while Japanese Yen weakens

Published: 11 March, 2012 17:23

The global currency markets accounts and balances are awaiting clearer prospects. This is due to the great concern of the now well-known Greek crisis. The crises has been temporarily mitigated by the cancellation of debts and new loans.

Greece in focus


In terms of international currencies, Greece is in focus. An agreement was signed on debts by private lenders and applies to investors holding government bonds. This has been possible since Greece decided on a thorough economic reform. Using the new loans and a slightly eased debt burden, this is now the country’s chance to reform its budgetary strategy. This will hopefully lead to improved production and increased employment. But more important is that the depreciation has been a prerequisite for the large aid package of 130 billion the country is expecting to get from the European Central Bank.

Anxiety

The goal of the whole process behind the new loans and debt write-downs for Greece’s behalf has been to stabilize the Euro. But concerns about the future continues and the crisis is not yet over.
- Greece’s debt may have been too big from the start, several analysts say, who also states that Greece have yet to enforce the reforms. It may be easier said than done. Greece is not the only country with a debt burden that causes problems. Portugal and Spain are also in trouble. This calls for vigorous action, although the problems, so far, are not quite as severe as in Greece. The most stable country, Germany, need to really show off to achieve a unitary EUR coooperation so that there will be a long term stability.

Governing the manager’s statement

On Thursday, March 8th, the Central Banks President, Mario Draghi, held a pressconference regarding the situation in the Euro area. The primary subject was of interest rates and that it was to be held unchanged at 1%. This means that the area’s GDP is forecasted to be lowered. At the same time, Mario Draghi announced that the two rounds of three-year loans that was mediated, reached many smaller banks, and therefor reached the small and medium sized businesses. It is an important indication that the loans functioned as intended. These companies account for 80% of the jobs in the EMU.
Inflation is however expected to increase, not least because of the rising oil prices and indirect tax raise.

Weaker Yen


All is not blue skyes in the rest of the world either. In Japan, the now one-year-old earthquake really left its mark. This had a signifigant importance on Japan’s current tradingbalance. The deficit is high, which in itself is expected. The latest report of the current account, which describes the month of January, show a much bigger deficit than what the analysts expected. It probably depends on a greater need for imported energy, an after-effect of the earthquake less than a year ago. The large nuclear power plant Fukushima, who suffered hard by the quake, is not yet operational. Meanwhile, reports are coming in of a decline in GDP in Japan. In the last quarter, GDP decreased by 0.2%.

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